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Why Is Tenneco (TEN) Down 4.9% Since Last Earnings Report?

In the latest trading session, Qualcomm (QCOM) closed at $57.78, marking a +1.37% move from the previous day.

A month has gone by since the last earnings report for Tenneco (TEN). Shares have lost about 4.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Tenneco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

In the reported quarter, Tenneco’s adjusted net income of $88 million remained flat year over year.

Quarterly revenues rose 4% year over year to $2.4 billion, beating the Zacks Consensus Estimate of $2.3 billion. The year-over-year rise was driven by revenue growth across the Clean Air and Ride Performance divisions. This upside stemmed from increased volumes of commercial truck and off-highway, along with new business and incremental content on light vehicles. On a constant-currency basis, total revenues were up 7% while value-added revenues increased 5% to $1.8 billion.

Adjusted EBIT (earnings before interest, taxes and non-controlling interests) was $149 million compared with $154 million recorded in the prior-year quarter. The adjusted EBIT results were impacted by rise in volume across commercial trucks and off-highway products, offset by costs related to steel and currency exchange rates.

Segmental Results

The Clean Air division’s third-quarter revenues were $1.6 billion compared with the year-earlier figure of $1.5 billion.

Revenues in the Ride Performance division were $461 million compared with $457 million recorded in the year-ago quarter.

The Aftermarket division’s revenues were $309 million, down from $322 million generated in third-quarter 2017.

Financial Position

Tenneco had cash and cash equivalents of $202 million as of Sep 30, 2018, down from $315 million as of Dec 31, 2017. Long-term debt was $1.3 billion as of Sep 30, 2018, compared with $1.36 billion as of Dec 31, 2017.

Outlook

For fourth-quarter 2018, the company expects organic revenues to grow 3% on a constant-currency basis. It anticipates currency to have a negative impact of 3% on revenues as of Sep 30, 2018. Moreover, the acquisition of Federal-Mogul is anticipated to be conducive to the company’s top line by $1.9 billion.

For 2018, Tenneco raised its organic revenue growth guidance to 6%, outpacing the industry production by 5 percentage points. The company expects revenues of approximately $11.8 billion in 2018, driven by strong organic growth and the Federal-Mogul acquisition. Moreover, value-add adjusted EBITDA margin is expected to be 11.3-11.5%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -15.89% due to these changes.

VGM Scores

Currently, Tenneco has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Tenneco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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